Energy firms forced to offer lowest tariffs

ShoppingBy Janey DaviesOn November 20, 2012

Energy consumers could see their bills fall by as much as £300 as their providers will now have to offer them the cheapest price tariffs. A new government proposal means that the Big Six gas and electricity providers will be forced to give their customers the very best deals on fuel prices or face big fines. The new rules will be unveiled today by Energy Secretary Ed Davey and will mean that energy firms will automatically put their customer onto their best deals without question. A source at Downing Street said: “Everyone will get the cheapest deal for their circumstances unless they opt out for whatever reason. But the default tariff will be the cheapest.” Energy firms will also only be able to offer four tariffs in comparison to the current 500 different tariffs on offer at the moment.

It is estimated that around seven in ten households are currently paying over the odds for power – some as much as £300 a year, experts at uSwitch have claimed. The new proposals follow months of hard negotiations between the government, regulators, the energy companies and Ed Davey. It was thought that David Cameron has shot himself in the foot last month when he said to the House of Commons that he would be shaking up the energy policy and forcing a new proposal through, without backing up his statements. At the time his Energy Secretary had no comment to make about the Prime Ministers’ claims and seemed to distance himself from his statements. It is thought that the PM has taken this unprecedented step as energy bills have risen by £200 in two years to a record high of £1,300 and energy regulator Ofgem has called for simpler tariffs to try to halt the trend.

So far, four of the Big Six energy companies have reduced the number of tariffs on offer following pressure from Ofgem and the government last month. They are E.ON, SSE, Npower and British Gas with E.ON offering four, SSE three, British Gas six and Npower eight. However, not everyone thinks that the governments new proposal is a good idea. Energy UK chief executive Angela Knight, who represents the energy companies, says that the Government’s proposals could mean the end of some of the cheap deals currently on offer. “If that is what the Government wants, that is fine. What it will do is potentially remove some choice away from people and certainly some deals that people get at the moment,” she told BBC Radio 4’s Today programme. “Certainly it is the case that if you have restrictions and constraints, then you can’t offer everything and you can’t offer the variety of choice that you get at the moment.”

And Mark Todd, director of Energyhelpline.com, agreed, saying: “Whilst we support the government’s pledges to keep energy costs down for consumers, we do so with trepidation. Rather than reducing the number of tariffs to a maximum of four, we believe that consumers would benefit more from better regulated competition. People don’t necessarily want fewer tariffs, they want lower prices and less complexity. We expect the outcome of this plan will be negative – suppliers will just pull many of their cheapest tariffs, and the energy market will be dominated by expensive tariffs from which customers will have no respite. A bad situation, made worse.”